What are the Basics of Cargo Insurance?

CitizenShipper CitizenShipper · Updated: March 8, 2023 / Published: April 18, 2021

Shipping veterans know that when you’re sending freight long distances there is a chance that issues will arise and negatively impact the delivery. Natural disasters and vehicle accidents are just two reasons why having the correct type of cargo insurance is extremely important.

Whether you’re a one-time freight shipper or a small business that regularly sends cargo, your shipment needs to be protected. Freight carriers are legally obligated to cover basic insurance to cover for damage, losses and delays, but carrier liability doesn’t cover the full value of your load. If the issue is a result of the shipper’s negligence, an act of a public authority — for example, a government entity or law enforcement agency — or some inherent issue with the cargo itself. 

  • When a shipper’s cargo is delivered damaged or not delivered at all, the first step is to file a claim.
  • The shipper’s claim must prove that the cargo was delivered to the carrier in good condition and the amount of the damage.
  • The claim must be filed by a shipper within 9 months of the delivery or scheduled delivery date.
  • The carrier then has 30 days to recognize the claim and 120 days to respond.

The Benefits of Cargo Insurance

It’s reassuring to know your carrier has some liability insurance, but there are circumstances in which you’ll want to purchase additional cargo insurance. If the value of the goods you’re shipping exceeds the liability coverage, additional insurance will fill in the gap. There are many factors that influence the rate you’ll pay for insurance, including freight class.

Another benefit is that the additional insurance will cover any damage that occurs outside of the carrier’s control. In short, your shipment will be covered for almost anything that happens — as long as it’s not due to your own negligence. Most cargo insurance does have some exceptions.

  • When you submit a claim using cargo insurance, you first provide proof of value and loss.
  • The insurance carrier pays out claims within 30 days.
  • Unlike carrier liability coverage, you don’t need to prove carrier negligence.

Insurance doesn’t just minimize your financial risks, it also adds peace of mind that no matter what happens, you’ll be protected. This article will guide you through the basics of freight insurance.

What Types of Cargo Insurance Exist?

There are different variations of cargo insurance on the market. These plans differ based on whether it’s for a specific amount of time or a specific shipment, the mode of transport or what specific instances are covered by the plan. Be sure to pay close attention to the policy details and read the fine print before purchasing insurance.

Land Cargo Insurance

As the name implies, land cargo insurance covers shipments over land — typically in a truck but sometimes in other vehicles.

  • Land cargo insurance protects against theft, damage from a collision and other similar risks.
  • This insurance policy is domestic only and limited to the purchasing country.

Marine Cargo Insurance

If you’re shipping freight overseas, you’ll need marine cargo insurance. These policies cover sea or air freight for the overseas part of the journey.

  • It protects your shipping from lousy weather, piracy and loading/unloading damages.
  • Whether you ship one time or regularly, you can choose between renewable and permanent insurance.

Single Coverage

If your shipment is not shipping frequently and you just need cargo insurance from time to time, a single coverage policy is the go-to. This specific coverage policy covers freight on a per-shipment basis.

Open Coverage

Open coverage insures freight for a specific period of time, typically one year. This single policy covers multiple shipments. This can be very useful when you frequently ship cargo.

  • Renewable: You have to renew this policy after a shipment or period.
  • Permanent: This policy covers unlimited shipments in a set time frame.

All Risk Coverage

All Risk Coverage is the broadest coverage you can find. It applies to losses and physical damages from external causes, with some exceptions:

  • Negligence
  • Temperature changes
  • Cargo abandonment
  • War
  • Loss of use
  • Failure to pay
  • Strikes
  • Riots
  • Civil commotions
  • Pollution
  • Earthquakes

Free of Particular Average (FPA)

This policy covers only damages or losses caused by the specific perils named in the contract. That’s why the shipping industry also refers to it as a Named Perils Policy. FPA policy usually doesn’t cover theft. It does usually include:

  • Burning, sinking
  • Train derailment
  • Truck overturning
  • Stranding
  • Collision

Other Insurance Policies

General Average: Only covers some parts of your shipment loss; it’s an essential requirement for sea freight. All owners of cargo onboard a ship contribute for lost or damaged cargo. This means you also pay for the coverage of other shippers.

Warehouse to Warehouse: This insurance covers your shipment from the moment it’s unloaded from the vessel to the customer’s warehouse.

What Does Cargo Insurance Not Cover?

The cargo insurance doesn’t cover damages caused by the shipper.

  • This includes damages caused by inadequate packaging and damage due to flawed products.
  • Products made from hazardous materials, some electronic products.
  • Cargo that’s highly valuable or fragile.
  • Some providers might exclude particular modes of transportation.

During the Shipping Process

When your driver delivers your freight, inspect it. Note any visible losses or damages. Unpack and check your shipment as soon as possible and contact your freight carrier and insurance company if you can identify hidden damages and losses.

When you make a claim, these are the details of your shipment that you should have in hand:

  • The inventory number as stated in the inventory list by your insurance provider
  • The item’s room, where the carrier packed the cargo before the shipping
  • Item description including all the details you remember, including the age of the item and the date of purchase
  • Description of the damage
  • Original costs and the replacement costs
  • Amount of your claim: either costs of repairing in case of damage or the item’s price in case of loss.

You should act immediately and file the damages, preferably within 24 hours. Carrier liability and freight insurance usually just cover the damage or loss of the goods, but not the lost time, the labor, or the shipping costs – Check in with your carrier and insurance company about these details.

If you have ground shipping needs or a reliable last-mile transporter from air or marine carriers, CitizenShipper has you covered! Our reliable transporters have experience moving heavy cargo across the country. Log into the CitizenShipper marketplace today and post your cargo shipping job today!

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